Patterns of structural change in developing countries

A central concept in development economics is the notion of structural change. Structural change, which we narrowly define in this chapter as the reallocation of labour across sectors with different productivity levels, featured prominently in the early literature on economic development by Kuznets (1966). Technological change typically takes place at the detailed industry level and thereby induces differential patterns of sector productivity growth. At the same time, changes in demand and international trade drive a process of structural transformation in which production factors such as capital, labour and intermediate inputs are continuously relocated across locations and economic activities (Kuznets, 1966; Chenery et al., 1986; Harberger, 1998; Hsieh and Klenow, 2009; Herrendorf et al., 2014).